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    The American dream has always involved three goals: starting up a small business, earning enough to purchase your own house, and spending your days in retirement on the outskirts of the countryside. With the current economy, the dream seems to be fading into oblivion as banks have made it virtually impossible for anyone to secure a reasonable home loan, especially after the real estate crisis.

    All is not lost however, as several private lenders have sprouted to fill that void. If you are planning on applying for a home loan in Texas, here are a few things you could do to get the best rate possible.

    Improve your Credit Score

    Your FICO score is perhaps the biggest variable that affects your mortgage rate. Your credit score is based on your past lending history which is why banks primarily use them to assess the default risk linked with an individual.

    Many prospective homeowners incorrectly believe that they would simply be rejected if they have a low credit score, which is simply not true. Theoretically, you can qualify for a home loan with a score as low as 600, but the interest rate and down payment will be so high that an average person won’t possibly be able to make the payments.

    According to myFico.com, a score of 740 or above is ideal as that margin hosts the lowest mortgage rates for borrowers. A score of 620 and above raises the mortgage rate to 5.5%. If you wish to qualify for the former, you’ll have to improve your credit score, which can be done through a variety of ways.

    The most obvious route would be to pay off all your existing loans, starting with the biggest first as they tend to have the most effect on your score. Other than that, you should scan your credit report for any errors and paying past due collection amounts.

    Higher Down Payment

    A higher down payment will lead to a lower mortgage rate. The interest rate on a loan is primarily decided by the default risk, interest rate risk, and the inflation risk; the higher the risk, the higher the premium.

    Paying a higher down payment reduces the default risk substantially as lenders become more confident about the borrower’s credit worthiness. While the ideal down payment is 20% of the property’s price, the threshold is lowered if the other factors are in check.


    While borrowers previously had to rely on their local loan brokers or banks to acquire a loan at a fixed rate, the internet has opened up several new avenues for prospective homeowners. Today, many private lenders offer competitive cheap loans online. It takes just a few minutes of Google searching to compare loan rates, with some lenders even featuring an APR calculator that tells you the total price of the loan based on future value.

    Keeping in mind the convenience offered today, we suggest you do your research thoroughly before deciding on a lender. You can always contact Todd Frank Home Loans for the best advice. Feel free to contact us at (972) 246-8633 to get the information!

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